Tax sneaks

Tuesday

Oct 14, 2008 at 8:04 AMOct 14, 2008 at 8:05 AM

The Orange County Register

A constitutional requirement that twothirds of state legislators are needed to impose new taxes made it possible for minority party Republicans to prevent massive tax increases to close the state's $15 billion budget deficit.

But there is more than one way to raise taxes. And according to the California Chamber of Commerce, even the recently approved, touted "no-new-taxes" budget effectively raised tax burdens on Californian by another $5.8 billion. How so?

"The Legislature finessed a 'tax increase' by accelerating and borrowing substantial revenues interest-free from California businesses for a minimum of the next two tax years," says the Chamber.

In final negotiations, an unprecedented new permanent 20 percent penalty was added for so-called tax "underpayments" of $1 million or more. The new penalty is projected to raise $1.5 billion in 2009 alone, or about 10 percent of the original deficit.

Beginning Jan. 1, 2009 personal income and corporate quarterly tax filings must be paid earlier in the year, again providing in effect free loans to the government of money it otherwise wouldn't have a legitimate claim to receive yet, about $2.3 billion worth. A new multi-billion deficit because of lower-than-expected revenue may force legislators to fix again the budget they thought they fixed last month. We hope this time they avoid more of their fast-shuffle of eliminating tax credits, accelerating collections and imposing new penalties as they did last time.